T-Mobile shares jump on Iliad buyout offer

Jul. 31, 2014
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T-Mobile CEO John Legere / Edward C. Baig

by Edward C. Baig, USA TODAY

by Edward C. Baig, USA TODAY

NEW YORK - Shares of T-Mobile surged nearly 6.5% to almost $33 a share after French telecom company Illiad made an offer to acquire T-Mobile, a proposal confirmed by both companies.

Iliad reportedly offered $15 billion in cash for control of the U.S.' fourth-largest wireless carrier..

The deal arrives as T-Mobile's disruptive "Un-Carrier" strategy seems to be working, based on reported quarterly results. T-Mobile added 1.5 million new customers during the second quarter and passed the 50 million customer milestone.

The company also said on Thursday that it has added 7.6 million new net customers overall during the past 15 months and now expects branded postpaid net additions for 2014 to be between 3 million and 3.5 million. The prior guidance was 2.8 million to 3.3 million.

T-Mobile reported quarterly profits of 49 cents per share, up from a first-quarter loss of 19 cents per share, though it says much of that was driven by a non-cash $731 million spectrum license transaction.

"We have completely reversed T-Mobile's trajectory and started a revolution that is changing the rules in wireless," T-Mobile CEO John Legere said in a statement.

Among its Un-Carrier initiatives since 2013, T-Mobile has eliminated onerous wireless contracts, agreed to reimburse early-termination fees for customers who switch to T-Mobile and most recently announced that folks could test drive an iPhone 5s for a week.

The company sold 6.2 million smartphones during the quarter and says tablet sales that were five times greater than sales in the prior quarter helped buoy the increase in mobile broadband lines. T-Mobile indicated that the upside in tablets and wearables provides a lot of opportunity.

Another opportunity presumably comes in the fall when Apple is expected to launch an iPhone 6. People often consider switching carriers when new devices hit the market. For now, T-Mobile's iPhone penetration is lower than rival carriers', and Legere in a conference call with analysts cited a report suggesting that T-Mobile's own customers are less likely to bail for another wireless provider compared to its competitors.

Not everything has gone swimmingly of late. T-Mobile was recently sued by the Federal Trade Commission over alleged unauthorized bogus "cramming" charges. And the results come amid reports that T-Mobile's long-anticipated merger with Sprint now won't happen until September at the earliest, assuming it happens at all.

Indeed, that would-be merger would seem to be in further flex with the Iliad offer. Legere wouldn't specifically comment on the rumored Sprint deal or any other -- he spoke to USA TODAY before news of the Iliad proposal hit -- but said T-Mobile "is not in need of doing something to be successful in the short- to medium-term."

Still, he hinted a potential transition could accelerate the scale game required to compete over the long haul against AT&T and Verizon Wireless.

Jackdaw Research analyst Jan Dawson thinks a T-Mobile-Sprint union makes more sense than the Iliad proposal. "T-Mobile's biggest problem is a lack of scale in the U.S., and an acquisition by Iliad would do nothing to solve that problem. I continue to believe that a Sprint-T-Mobile tie-up would is the best option for increasing the level of competition in the U.S. market by giving two smaller players a better basis on which to compete than either can achieve independently."

Neither T-Mobile nor Sprint would comment on the Iliad deal.

Legere did tell USA TODAY the latest Un-Carrier moves would come later in the summer. He didn't offer specific clues on what those moves would be but said that "you can trust is that they'll be bigger and better than ever."

Legere also acknowledged during the interview that there are still areas to be covered. But T-Mobile has been expanding and modernizing its network and now provides 4G LTE coverage to more than 233 million people in 325 metro areas.